TESCO is launching a long-awaited assault on India’s £175billion-a-year groceries market, with plans for a cash-and-carry chain and a tie-up with one of the country’s biggest conglomerates.

TOP OF LIST: India move is second only to US as Leahy's expansion target

Britain’s biggest supermarket group, led by chief executive Sir Terry Leahy, is to invest £60million over the next two years to establish the cash and carries. The shares rose 2.75p to 396.75p.

The shops will carry the Tesco name and sell fresh food, grocery and non-food products, including Tesco-branded items, to small shops, restaurants and “kirana” businesses — India’s answer to convenience stores.

Tesco said yesterday it had also agreed to help conglomerate Tata develop its Star Bazaar hypermarket chain. The grocer has been looking to move into India for at least three years, with Leahy saying it was “top of the list” for the group’s inter­national expansion after the US.

It was on the verge of signing a deal with industrial group Bharti Enterprises two years ago, but lost out to American giant Wal-Mart.

India is one of the world’s fastest-growing retail markets, although it is heavily regulated.

To protect small shops, the Indian government has banned foreign supermarket groups from operating stores aimed at the everyday shopper, and restricts them to wholesale cash-and-carry stores.

Tesco International director Philip Clarke said the group would launch its own shops should the rules change, but he did not expect that to happen for several years.

The tie-up with Star Bazaar would give Tesco valuable intelligence on how the Indian market worked as the chain grew from four to 50 stores in the next five years.

Tata is paying Tesco a fee and the deal would also allow the group to establish a supply chain in India.

The group plans initially to open three distribution hubs, in Mumbai, Delhi and Bangalore, which will support a network of cash-and-carry stores.

Analysts said the move was a “sensible” way into the market. Shore Capital’s Darren Shipley said by targeting kirana stores, Tesco was reaching richer Indians who sent their servants out to shop.